MOI UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

REG NO: BBM/1699/22

NAME: RUKIA HASSAN
COURSE CODE BBM 304
COURSE TITLE ADVANCED ACCOUNTING
TASK ASSIGNMENT
LECTURER RODGERS KIMUTAI
DATE DUE 9TH March 8, 2024
Question 1
State 3 different regulatory influence of preparation of published financial
account of a quoted company and briefly comment on each of them.
Comment on effectiveness of this regulatory system.

1. Financial Reporting Standards (IFRS)

International Financial Reporting Standards (IFRS) are a set of accounting principles and
guidelines that dictate how financial statements should be prepared and presented.
These standards ensure consistency and comparability of financial information across
different companies, making it easier for investors and stakeholders to analyze and make
informed decisions. FRS provides specific rules for recognition, measurement,
presentation, and disclosure of various financial items such as revenue, expenses, assets,
and liabilities.
The role of FRS is to promote transparency, accuracy, and reliability in financial
reporting, thereby enhancing the credibility and trustworthiness of published accounts.

2.Stock Exchange Listing Requirement

Influence: Quoted companies must comply with listing requirements set by stock
exchanges where their shares are traded. These requirements often include
guidelines for financial reporting, such as the frequency and content of financial
statements, to ensure transparency and maintain the integrity of the exchange.

3 Auditing and Assurance Standards: Auditing and Assurance Standards establish the
guidelines and procedures that independent auditors must follow when examining a
company's financial statements.
These standards ensure that auditors perform their work objectively, independently, and
in accordance with professional ethics. Auditors assess the fairness and reliability of the
financial statements, verify compliance with accounting standards, and express an
opinion on whether the accounts provide a true and fair view of the company's financial
position and performance.
The role of auditing standards is to enhance the credibility of published accounts by
providing an independent assessment of their accuracy and adherence to regulatory
requirements.

Regulatory system is essential for maintaining confidence in financial markets and

protecting the interests of investors and stakeholders. It helps prevent fraudulent
practices, promotes transparency, and ensures consistency in financial reporting.
However, the effectiveness of the system can be challenged by the complexity of
financial transactions, creative accounting practices, and the constant evolution of
business models. Regulators need to stay vigilant, continuously update regulations to
address emerging risks, and have sufficient enforcement powers to deter non-
compliance. Additionally, global coordination and harmonization of accounting
standards and regulatory practices can further strengthen the effectiveness of the
regulatory system in a globalized economy.

QUESTION TWO 2.

There are those who suggest that any standard setting body is redundant because
accounting standards are unnecessary. Other people feel that such standards should
be produced, but by the government, so that they are a legal requirement.

(a) Discussing the statement that accounting standards are unnecessary for the
purpose of regulating financial statements.
Transparency and disclosure: Accounting standards mandate specific disclosure
requirements, ensuring that relevant information is disclosed in the financial
statements. Without these standards, companies might have the discretion to
selectively disclose information, potentially leading to asymmetrical information
and undermining investor confidence. Standardized disclosure requirements
enhance transparency, enabling stakeholders to assess the financial position and
performance of a company accurately.
Investor protection : Accounting standards play a crucial role in protecting the
interests of investors. By prescribing uniform rules for financial reporting, these
standards reduce the likelihood of manipulation or misrepresentation of financial
information by companies. Clear accounting standards help mitigate information
asymmetry between management and investors, thereby enhancing investor
confidence and trust in financial markets.
Enhancing transparency: Accounting standards require companies to disclose essential
information about their financial transactions and operations. By mandating specific
disclosures, accounting standards help improve transparency and allow stakeholders to
understand the underlying economic reality of a company. This transparency is
particularly important for protecting the interests of investors and creditors who rely on
financial statements to assess the risk and return associated with their investments.
1. Facilitating accountability: Accounting standards provide a framework for assessing
the compliance of companies with reporting requirements. This promotes
accountability, as companies are expected to adhere to established rules and principles
when preparing their financial statements. Accounting standards also help auditors in
evaluating the accuracy and reliability of financial information, enhancing the overall
quality of financial reporting.
.
(b) Discussing whether or not the financial statements of not-for-profit entities should
be subject to regulation:

The regulation of financial statements for not-for-profit entities is a subject of debate.

Non-profit making organizations differ from for-profit entities in their objectives and
stakeholders, which raises questions about the need for regulation specific to this
sector. However, there are arguments both in favor of and against regulating the
financial statements of not-for-profit entities.
Arguments for regulation:
1. Accountability and transparency. Not-for-profit organizations often rely on public
trust and donations to fulfill their missions. Regulating their financial statements can
enhance accountability and transparency, ensuring that donated funds are used for
their intended purposes. Regulation can help prevent financial mismanagement, fraud,
and the misuse of resources.
2. Stakeholder protection: non profit making organizations have various stakeholders,
including donors, beneficiaries, and the general public. Regulating their financial
statements provides stakeholders with reliable information to assess the organization's
financial health, effectiveness, and efficiency. It can also protect stakeholders by
requiring proper disclosure of financial activities and ensuring compliance with legal and
ethical standards.
3. Standardization: Regulation can promote standardization in financial reporting
practices among not-for-profit entities. This can facilitate comparisons between
organizations, enable benchmarking, and support the evaluation of their impact and
effectiveness.

Arguments against regulation:

1. Cost and burden. Regulatory compliance can impose financial and administrative
burdens on not-for-profit organizations, diverting resources from their core missions.
Smaller organizations with limited resources may find it particularly challenging to
comply with complex accounting and reporting requirements.
2. Diverse nature of non profit making organization. Not-for-profit entities encompass
a wide range of activities and structures, including charitable organizations,
foundations, educational institutions, healthcare providers, and more. The diversity in
their missions and operations makes it challenging to develop a one-size-fits-all
regulatory framework that adequately addresses the unique characteristics of each
organization.
3. Self-regulation and governance. Some argue that not-for-profit entities can
effectively regulate themselves through good governance practices, such as
independent audits, board oversight, and transparency initiatives. Advocates for self-
regulation contend that excessive external regulation may stifle innovation and
flexibility in achieving the organization's mission